Is Callaway on the Market? [Update from the Golf Giant on March 30th]
There’s talk that Topgolf Callaway Brands Corp. may have put Callaway up for sale, according to South Korean rumors. The company issued a strong denial. But the stock market movements continue.
There’s speculation that the colossal Topgolf Callaway Brands Corp. may have put Callaway up for sale. Despite the company’s denial of South Korean rumors that surfaced on Wednesday, a potential sale could signify a shift from an entirely American enterprise to a Korean one. If you stick with us till the end, we’ll equip you with all the crucial updates from the week so you can follow the rest of the potential episodes of the season.
THE FACTS
The California-based company, Topgolf Callaway Brands Corp, might be considering selling its Callaway Golf business. The news broke just before 11 AM on March 20 (Seoul time), when the South Korean newspaper, Chosun Daily, reported the exclusive.
Just before 2 PM on the same day in California, the company issued a statement denying any such discussions of a potential sale of the company or its golf equipment business.
[30 MARCH UPDATE]
Since the news broke, the spotlight has been on MODG, the golf giant on Wall Street. Today, it was revealed that Assenagon Asset Management S.A. acquired a fresh stake in the company during the fourth quarter. The fund purchased 656,370 shares valued at approximately $9,412,000. Additionally, other institutional investors have made adjustments to their holdings in the business.
In the meantime, this forceful official statement remains the sole communication from the company on the matter:
"While it is our long-standing practice not to respond to market rumors and speculation, in light of today's unusual market activity, coupled with a recent media report originating in Korea regarding discussions of a potential sale of the company or its golf equipment business, we confirm that we are not aware of any such discussions. We do not intend to comment further on this topic, and we assume no obligation to make any further announcement or disclosure should circumstances change."
Topgolf Callaway Brands Corp
ABOUT THE HOLDING
Topgolf Callaway Brands Corp posted strong figures in 2023, with each company under the umbrella posting more than $1 billion in sales and a total sales figure of $4.28 billion.
Topgolf posted the highest sales at $1.76 billion after opening 11 new venues in 2023 - strong figures in the ever-increasingly strong golf entertainment market.
Callaway dominated sales across all departments of golf club sales, posting the number 1 market share for drivers, fairway woods, hybrids, and irons.
Callaway completed its merger with Topgolf in March 2021, with Callaway issuing 90 million shares to Topgolf investors.
THE CURRENT OWNERS
The current major shareholders of Callaway Golf include:
BlackRock Advisors LLC (12.09%)
Providence Equity Partners LLC (11.48%)
Thomas Dundon (10.11%), a founder of Dundon Capital Partners, a Dallas-based private investment firm.
They might be planning to spin off Topgolf, a subsidiary of Topgolf Callaway Brands Corp., and sell only Callaway Golf.
HOW MUCH
The current rumored sale price would be around $2.98 billion. This price is considered reasonable by industry players given its significantly low market capitalization of $2.554 billion (about 3.4 trillion won), compared to that of rival Acushnet Holdings (Titleist) of $3.902 billion, and an accompanied management premium.
A GLOBAL SOUTH KOREAN BUSINESS?
The investment banking industry has been paying attention to the possibility of Callaway Golf becoming Korean-owned. A South Korean company is reportedly in the running.
If Callaway Golf is acquired by a South Korean company, the global big three golf brands would be South Korean.
Titleist was acquired by KRX-listed FILA Holdings Corp. in 2011.
TaylorMade was also sold to a Seoul-based private equity firm, Centroid Investment Partners LC, in 2021. At that time, F&F, a South Korean apparel company, participated as the strategic investor.
AN INVESTMENT WORTH CONSIDERING?
Topgolf Callaway Brands (MODG) shares experienced a significant increase of 8.8% ( to close at $15.66) between the 19th and 20th of March, when the rumor of the sale was released. This move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock’s 1.4% loss over the past four weeks.
The company is currently listed on the NYSE with a market capitalization of $2.554 billion.
Zacks Equity Research estimates that this maker of golf equipment and accessories is expected to post break-even quarterly earnings per share in its upcoming report, which represents a year-over-year change of -100%. Revenues are expected to be $1.15 billion, down 1.5% from the year-ago quarter.
For Topgolf Callaway, the consensus EPS estimate for the quarter has been revised 162.5% higher over the last 30 days to the current level. A positive trend in earnings estimate revision usually translates into price appreciation. So, according to Zacks Equity Research it’s advisable to keep an eye on MODG going forward to see if this recent jump can turn into more strength down the road.